Tuesday, May 22, 2012

Increasing Awareness of Credit Card "Robo-Signer" Abuses

A recent series in the American Banker magazine has led to greater public awareness of abusive and fraudulent litigation tactics in consumer debt-collection lawsuits brought by credit-card originators.  Business Week takes up the story as well.

So-called "robo-signing" - in which bank employees sign off on thousands of litigation documents that they have not read and the contents of which they have no knowledge - has caused a public scandal for many of the same companies in the mortgage foreclosure context, leading some banks to institute foreclosure moratoria while they supposedly put some internal controls in place to ensure that their litigation documents are legitimate.  The phenomenon has long been strongly suspected by credit-card defense attorneys and in some cases confirmed by deposition or trial testimony.  It has not, until now, led to public scandal, however, and indeed, the banks have taken action more in the nature of covering it up than of the contrition shown in the foreclosure context.  

For example, an examination of Citibank's records-custodian affidavits in credit-card cases reveals a progressive removal of information suggesting that the affiants are robo-signers.  Affiants described a few years ago as essentially third-party debt collectors with the full-time job of supervising outside attorneys and no role in record-keeping other than that of transmitting records to counsel are described in current versions of the same form affidavits vaguely as records custodians and agents of Citibank and fully participatory and knowledgeable of the record-keeping process.  The likelihood remains that the same individuals in the past as now basically go to work and sit around signing affidavits all day at a pace rendering it humanly impossible to have obtained personal knowledge of the facts of a single case.

The specific impetus for the new public revelations are the assertions of a whistleblower from JPMorgan Chase named Linda Almonte.  Ms. Almonte was fired after raising her concerns internally at Chase, and subsequently "told all" in a letter to the SEC.  She tells of Chase employees absent-mindedly working through stacks of records-custodian affiavits, signing huge piles of them while attending unrelated meetings, without having reviewed or obtained knowledge of underlying records.  No surprise there for debt defense lawyers, though the revelations are notable for their publicity. Of more interest is that Ms. Almonte reveals that an internal audit at Chase actually disclosed that the bulk of the credit-card account records reviewed did contain significant errors, apparently stemming from Chase's blending of various record-keeping systems over the course of its various corporate mergers and reorganizations.  

Indeed, there appears to be more to the process of spitting out a current account balance owed in a credit-card lawsuit than just pressing a button on a computer.  Chase's various systems had to be reconciled essentially by hand by low-level employees whose work basically wasn't checked but was simply trusted by the "robo-signers."  As Chase is not the only bank that has gone through mergers and reorganizations over the years, this certainly suggests that all originators' assertions regarding the contents of their records should be treated with skepticism and potential sources of error in merged or revised record-keeping systems investigated.

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